A recent presidential directive and piece of legislation seek to ban companies that engage in unlawful practices from receiving federal contracts. On Wednesday, President Obama signed a memorandum ordering the IRS to review the accuracy of certifications submitted by aspiring government contractors attesting to their non-delinquent tax status, and provide him with a report within 90 days. In addition, the memorandum directs the heads of federal agencies to provide recommendations on how to bar tax-delinquent companies from being awarded federal contracts. In a statement, Obama said:

The steps I’m directing today and the steps I’m calling on Congress to take are just basic common-sense. They’re not going to eliminate all of the waste or abuse in government contracting in one fell swoop. Going forward, we’ll also have to do more to hold contractors more accountable not just for paying taxes, but for following other laws as well.

As an impetus for this effort, Obama cited studies by the Government Accountability Office (GAO) that found government contractors owed more than $5 billion in unpaid taxes.

On the legislative front, Rep. Alan Grayson (D-Fla.) introduced a bill that would prevent the federal government from awarding contracts or grants to, entering into agreements with, or otherwise promoting companies that engage in certain illegal activities, or knowingly hire an individual who has committed a crime. Under the terms of the Defund the Crooks Act (H.R. 4444), contracts could not be awarded to an organization that (a) has been convicted of a violation of any federal or state law; (b) had its corporate charter revoked by a state or other issuing authority due to the failure of the organization to comply with federal or state laws; or (c) has filed, submitted, or transmitted a fraudulent claim with or to any federal or state agency authorized by law to promulgate regulations, including the Department of Defense, the Department of Health and Human Services, and the Department of Labor. Banned contractors would include those that knowingly hire as an employee or contractor an individual who has been convicted of a violation of federal or state law. This sanction would extend to parent companies, subsidiaries, and majority owners of the company in violation of the above terms. The ban on funds to offending companies would not apply to payments for goods or services provided to the government before the enactment date.

If signed into law, these terms would apply immediately to all contracts awarded after the enactment date. Those contracts or grants awarded prior to the enactment date that would expire more than a year after would be terminated within the year if the company is in violation of the bill’s terms.

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